Three Banks Fall Below 30% Liquidity Ratio Requirement—CBN

By Dipo Olowookere

No fewer than three deposit money banks (DMBs) operating in the country have fallen short of the minimum liquidity ratio requirement of the Central Bank of Nigeria (CBN).

In its H1 2018 economic review, the apex bank said the affected banks have liquidity ratio less than 30 percent.

“The industry liquidity ratio increased to 46.09 percent at the end of the first half of 2018, from 45.8 percent at end-June 2017, reflecting the rise in the stock of liquid assets held by banks.

“With the exception of three (3) commercial banks, all others met the minimum regulatory liquidity ratios of: 30.0 percent for commercial banks; 20.0 percent for merchant banks; and 10.0 percent for non-interest banks, at end-June 2018,” the CBN said.

However, the report by the central bank, which did not reveal identity of the affected lenders, said generally, the health of banks in the country improved in the period under review as a result of growth in the macroeconomic environment.

“The health of banks improved in the review period, following the sustained recovery in macroeconomic conditions, including declining inflation, stable exchange rate and gradual upswing in the real economy.

“At end-June 2018, the industry average capital adequacy ratio (CAR) was 12.08 percent, compared with 10.23 percent and 11.51 percent at end-December 2017 and end-June 2017, respectively. The development reflected the increase in banks’ total qualifying capital.

“The industry threshold, however, remained at 15.0 percent for banks with international authorisation and 10.0 percent for banks with either national or regional authorisation,” the report stated.

Furthermore, the report said, “Asset quality of the banking industry, measured by the ratio of non-performing loans to total loans (NPL ratio) fell to 12.45 percent at end-June 2018, compared with 14.80 percent and 15.02 percent at end-December 2017 and end-June 2017, respectively.

“At this level, the ratio remained above the regulatory threshold of 5.0 percent.

“The decrease in the NPL ratio reflected the effect of the favourable macroeconomic conditions and stricter prudential regulation.

“To further consolidate on the improvement, the CBN directed banks to intensify efforts at debt recovery, realisation of collateral for lost facilities and strengthening their risk management processes.

“Loan loss provision was 75.74 percent at end-June 2018, as against 80.4 percent in the corresponding period of 2017.”